Today the suddenly subdued IG dollar DCM hosted one $800mm two-part deal from Harley-Davidson Financial Services in the form of a 2-year FRN and a 3-year fixed rate senior unsecured transaction. In fact, the SSA space outperformed on the volume front thanks to Kommuninvest’s $1b 3-year bringing the all-in IG day total to 2 issuers, 3 tranches and a mere $1.8b…………What gives? Well, look at the CT10-year that closed out yesterday’s session yielding 3.07% and 3.10% today. U.S. interest rates are going up, though they’ve been tame thus far as they begin their trajectory.

In speaking with Mischler’s resident Treasury guru Tony Farren about the subject of rising rates today, the very first week of 2018 (Jan. 2-5) saw the 2yr (1.891%), 5yr (2.213%), 10yr (2.416%) and the 30yr (2.749%) all trading at their 2018 YTD low yields. Fast forward to today – both the 2yr (2.589%) and 5yr (2.941%) are at the highest yields since 2008; the 10yr (3.10%) is at its highest yield dating back to 2011 while the CT30yr (3.22%) came to within 1 bp of its YTD high which was the highest yield since 2015. The market IS and always has been ahead of the curve, while the Fed has ALWAYS and will forever be a market laggard. It’s the nature of the beast we call “the market.” Rates are finding a new level and that level is HIGHER folks!

Things could certainly be changing especially after S.F. Fed Chief Williams’ comments yesterday in which he said he’s “very positive” on the domestic economic outlook and shared his view that we can sustain 3 to 4 rate hikes in 2018! The statement has more impact than it typically would, especially considering that Mr Williams will soon upgrade to a much more powerful role as the NY Fed Chief. There is a large contingent of people and market participants who would like to see Fed-speak banned (other than post-FOMC Press Conferences and Q&A). Still, rates are going up folks. Just have a look at the emboldened U.S. dollar for evidence. Look at Emerging Markets, especially Argentina and Turkey. They are signals not only of their own domestic issue,s but also the rising rate environment. Sprinkle on some powerful geopolitical risk factors like the bubbling Middle East, Iran vs. the unlikely Dynamic Duo that is quickly becoming Saudi Arabia and Israel, and Kim Jong-un’s recent comments threatening to un-schedule the June 12th denuclearization talks. China, Italy, Washington dysfunction – they are all among the starring players in an endlessly rewritten historical epic scenario that beckons a script doctor’s skills to fill in the holes, add some character arcs and tie all the plots and subplots together to achieve a nice, neat denouement. Guess what? That happy ending is not coming; after all, this is the reality, not illusion and we, readers are realists. This is Wall Street, not Hollywood. At least I think and hope so.

So, the 3.095% CT10yr yield was the wake-up call that gave pause for today. We are also running $7b shy of this week’s syndicate estimate, but tomorrow’s another day!

Here’s a look at the WTD and MTD IG Corporate new issue volume as measured against syndicate desk estimates:

The IG Corporate WTD total is 79.32% of this week’s syndicate midpoint average forecast or $26.905b vs. $33.92b.

MTD we’ve priced 64.28% of the syndicate forecast for April IG Corporate new issuance or $86.675b vs. $134.84b.

There are now 15 issuers in the IG credit pipeline.

Today’s IG Primary & Secondary Market Talking Points

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 2 IG Corporate-only new issues was <15.00> bps.

BAML’s IG Master Index was unchanged at +114. (It’s post-Crisis low is +90 set on 2/01).

Bloomberg/Barclays US IG Corporate Bond Index OAS widened 1 bp to 1.09 vs. at 1.08. (0.85 is its post-Crisis low set on 1/30).

What with poor market tone, widening spreads, “chatter” of trade wars from Trump Twitter account, a major Northeast storm on the way and CVS heard rumbling into position for next week’s M&A related financing, it was indeed VERY WISE for the IG dollar DCM to stand down today. I am once again honoured to have received 100% participation for my Friday “QC” edition, from Wall Street’s Best and Brightest Investment Grade Fixed Income Syndicate sophisticates I surveyed all of them for next week’s forecast and for March IG Corporate volume. Strap yourselves in for a humdinger of a week next week and what looks like March IG Issuance Madness. Their thoughtful comments, which add color to their forecast numbers are in-depth and formidable, especially in today’s edition.

Here’s a look at the WTD IG Corporate new issue volume as measured against syndicate desk estimates:

The IG Corporate WTD total is 136.89% of this week’s syndicate midpoint average forecast or $36.85b vs. $26.92b.

Investment grade corporate bond trading posted a final Trace count of $17b on Thursday versus $23b on Wednesday and $20.1b the previous Thursday.

The 10-DMA stands at $18.9b.

Syndicate IG Corporate-only Volume Estimates For This Week and March

IG Corporate New Issuance

This Week
2/26-3/02

vs. Current
WTD – $36.85b

Low-End Avg.

$25.72b

143.27%

Midpoint Avg.

$26.92b

136.89%

High-End Avg.

$28.12b

131.05%

The Low

$15b

245.67%

The High

$40b

92.13%

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition! Thank you to all of them. 17 of today’s respondents are in the top 18 of the new 2018 League table including 19 of the top 21 according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. The 2018 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 82.87% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they are the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they are the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

As always “thank you” to all the syndicate desks that participated in today’s survey. I greatly appreciate your time to contribute and for making this edition of the “QC” among the most widely read!

“Happy Friday. You can almost hear the rumble of CVS getting into position! I am looking for forecasts for BOTH MARCH and NEXT WEEK today!

All the data you need to know is here. There’s lots to talk about so let’s run through this week’s key geopolitical risk recapas a segue to the big question: What does Wall Street’s Biggest Syndicate Desks Expect re: Next Week’s IG DCM?

NORTH KOREA
The U.S. imposed new sanctions against 28 NOKO ships registered under changing names and under different national flags including China. The ships funnel banned exports into NOKO. The action is another step the U.S. has taken toward a full NOKO blockade. With diplomacy the strongly favored path to resolution, the Trump Administration will agree to a diplomatic resolution to tensions only if NOKO agrees to put denuclearization on the table which it refuses to do. In the interim, the U.S. DoD conducted classified military exercises in Hawaii last weekend and the U.S. is pre-staging equipment and supplies in the Pacific. I reiterate that sources continue to tell me to “watch” mid-March thru April as NOKO will be back to its old tricks and the game will ratchet up with newly announced war games along with a much larger allied force participating together.

TRUMP TO LAUNCH A TRADE WAR?
Sighting unfair trade practices and bad policy on the U.S. steel and aluminium industries, Pres. Trump invited sector CEOs to the White House on Thursday and when they departed, the current president declared he will impose trade tariffs/quotas on imports amounting to 25% on steel and 10% on aluminium. The announcement, which apparently did not include his sending any advance memos to key White House advisors such as Gary Cohn or TreasSec Mnuchin, was made in the name of “national security,” setting off the fear and tenor of new “trade wars.” The move, coupled with unrelated comments from newly-appointed Fed Chair Powell, weighed heavily on the DOW, which lost 550 points on Thursday and extended declines into Friday’s early trading.

THE FED
New Fed Chief Jay Powell delivered his testimony before the Senate Thursday. Powell sent jitters across markets on Tuesday following his House testimony and Q&A when he said, “my outlook for the economy has strengthened since December” albeit in the midst of the recent historic though transparent, healthy market correction. The market always likes to be ahead of the curve and is concerned over a tighter monetary policy stance with participants repricing in higher inflation and interests rates. Yesterday Powell said 4 hikes “would be gradual” and sighted that aggressive tightening is challenged with inflation so low.

GERMANY
A poll released today showed that 56% of Germans favor the SPD joining Merkel’s grand coalition or “marriage of convenience” to avoid another vote and further turmoil in the EU’s keystone nation. The SPD Party formally votes therein tomorrow March 2nd. The caveat is the poll surveyed a much wider group of voters whereas the Friday vote includes the actual hardcore Socialist members.

U.K. & BREXIT
Theresa May delivers a speech on Friday, March 2nd outlining her vision for the U.K.’s future relationship with the EU. Key points were hammered out at the PM’s country manor Chequers with her cabinet ministers on Feb. 22nd. After having drawn so many red lines pre-negotiations with the EU, May & Co. have backed themselves into a corner. Now Ireland and Wales are pushing back on May regarding her hard stance on the customs union. N. Ireland wants to remain under EU customs rules with a UK/EU border demarcation zone in the Irish Sea. Wales subsequently fears reduced trade as a result of EU and Irish ships avoiding British ports. Wales voted to leave the EU but favors some EU alignment.

ITALY

Italy’s Sunday March 4th election shows the combined right-wing alliance parties running around 37% likely enough for victory. Silvio Berlusconi’s Forza Italia has a narrow lead. The centre-right coalition is projecting sufficient votes to govern without a second ballot.

CHINA

China’s ruling Communist Party proposed lifting limits on presidential terms, a first step to assuring President Xi remains in power interminably. A vote on the proposal is slated for next month and is expected to pass marking a major departure from rules in place for decades. Power has never been as centralized since the days of Mao. Maybe Xi should contemplate a little red book a la Mao and call it “Xi’s Little Red Book Volume II.”

SPAIN

With no compromise in sight, Spain’s PM Rajoy is challenged by efforts to impose order on the Catalan region. It is highly improbable that self-exiled leader Carles Puigdemont governs de facto from Brussels. Meanwhile, PM Rajoy cannot pass a national budget having lost the support of the Basque party that backs Catalonian independence. This could force new elections. Nationalist parties are subsequently securing more support foretelling new tensions in a nation that was ravaged by civil war from 1936-1939.

Let’s now take a deep dive into the technical data. Entering this morning’s Friday session –

The IG Corporate WTD total stands at $36.85b. We priced $9.93b more than the week’s average midpoint estimate of $26.92b or +36.89%.

February finished the month having priced 105.77% of the syndicate midpoint forecast for IG Corporates new issuance or $94.117b vs. $88.98b.

Entering today’s session, the YTD IG Corporate-only volume is $229.452b vs. the $272.358b YoY or <$42.906b> / <18.70%> less than a year ago.

The all-in or IG Corporate plus SSA YTD volume is $311.067bvs. $354.608b YoY <$43.541b> or <14.00%> less than vs. 2017.

Here are the five key primary market driver averages for the 29 IG Corporate-only deals that priced this week.

o NICS: 5.36 bps

o Oversubscription Rates: 2.52x

o Tenors: 13.49 years

o Tranche Sizes: $768mm

o Spread Compression from IPTs to the Launch: <14.42> bps

Here’s how this week’s critical primary market data compares against last week’s numbers:

Week on week, average NICs widened considerably by 3.41 bps to an average 5.36 bps vs. 1.95 bps across this week’s IG Corporate-only new issues that displayed relative value.

Over subscription or bid-to-cover rates, the measure of demand, decreased by 0.77x to an average 2.52x vs. 3.29x.

Average tenors extended by 1.52 years to an average 13.49 years vs. 11.97 years.

Tranche sizes grew by $142mm to $768mm vs. $626mm.

Spread compression from IPTs to the launch/final pricing of this week’s 48 IG Corporate-only new issues widened by 2.04 bps to <14.42> bps vs. <16.46> bps.

Spreads across the 19 major IG industry sectors gapped out 4.73 bps to an average 13.68 bps vs. 8.95 bps as measured against their average cumulative post-Crisis lows!

For the week ended February 28th, Lipper U.S. Fund Flows reported a net inflow of $1.372b into Corporate Investment Grade Funds (2018 YTD net inflow of $20.632b) and a net outflow of $702.879m from High Yield Funds (2018 YTD net outflow of $13.202b).

Taking a look at the secondary trading performance of this week’s 48 IG Corporate and 5 SSA new issues, of the 53 deals that printed, 11 tightened versus NIP for a 20.75% improvement rate, 33 widened (62.25%), 9 were flat (17.00%).

Entering today’s Friday session here’s how much we issued this week:

IG Corps: $36.85b

All-in IG (Corps + SSA): $43.10b

And now it’s time for today’s question “what are your thoughts and numbers for MARCH and next week’s IG Corporate new issue volume?”
Thank you in advance for your time and contribution!

Please know that on each and every new issue, the guy-in-the-corner is ALWAYS be in YOUR corner on deal day! If an issuer asks you who some of the best diversity firms are, my hope is that you’ll mention Mischler Financial and the guy-in-the-corner. Our distribution is high quality, prolific and consistent. On deal day, we perform enough to influence your bid-to-cover rates with REAL high quality and unpadded “sticky” account orders.

Today the IG dollar DCM produced zero…….zilch……….nada. It was a December Friday goose egg as they say! The geopolitical risk monitor featured quite a bit of fluid news this week so be sure to review the QC monitor by scrolling below. Also, the “Best and the Brightest” are back this week albeit there is not much activity lining up to get done. Next week looks like a light front-loaded week of between $5-10b. The average estimate of the 25 top syndicate desks for next week’s IG Corporate only issuance is $7.58b. The FOMC holds its final meeting of 2017 next Tuesday and Wednesday the 12th and 13th with overwhelming expectations for a rate hike that has long been baked into the market………..and despite the absence of inflation. It looks like December issuance will come to an end a few days earlier than is the historical average with a chance of posting the lowest December IG Corporate issuance volume since $21.10b printed the same week back in 2008. Team B&B are all waiting below for you to take in their forecasts and comments. Enjoy the read.

· 12/05 – U.S. reveals CHAMPs or powerful microwave pulses emitted from missiles launched from B-52s that can disable NOKO’s electronic missile and launching systems. 12/02 – WH Nat’l. Security Advisor H.R. McMaster says “possibility of war with NOKO increases every day.” 11/28 – South Korea’s Joint Chiefs of Staff verified that North Korea fired a ballistic missile that landed in the Sea of Japan. SOKO Olympics begin Friday 2/2018 thru Sunday 2/25. 11/20 – Pres. Trump announced the U.S. designated NOKO as a state sponsor of terrorism. Warns NOKO that “nuclearization puts its regime in grave danger & increases the peril it faces.”

ELEVATED“MENA and
Trumponomics and Beltway Dysfunction”

· 12/06 – Pres. Trump formally recognizes Jerusalem as Israel’s capital. Plans to move U.S. embassy there from Tel Aviv. Could take three years. Palestinian leader Mahmoud Abbas and Jordan’s King Abdullah warn Trump of dangerous consequences for stability and security in the Middle East. Turkey’s Erdogan threatens to cut ties with Israel calling the move a “red line for all Muslims” and decision puts “world and region in a ring of fire.” 12/04 – Former Yemeni President Ali Abdullah Saleh assassinated in Sanaa by former allied and Iranian-backed Houthis. Yemen, like Lebanon are sights of proxy wars fought between Saudi Arabia and Iran. 11/28 – Israeli Mossad working with Saudi’s General Intelligence Presidency (GIP) over mounting tensions with Iran. Shared interests against Iran are bringing both nation’s closer. Lebanon’s PM al-Hariri resigned from Saudi Arabia 11/05 blaming Iranian aggression. Abandons support of Iran’s Hezbollah terror group. Beirut, is proving ground for Saudi-Iranian proxy wars. Crown Prince Mohammed bin Salman’s plans sweeping with “Vision 2030” to wean KSA off oil. Saudi inner players arrested in anti-corruption probe involving multi-billion dollar “settlements.” Both Trump and KAS share strong views of an anti-nuclear Iran. KSA needs oil above $81 to break even. Mideast tension expected to boost the price of oil.

· 12/01 – U.S. Senate GOP passes the most sweeping tax overhaul in over 30 years in a 51-49 vote. This is the biggest tax bill and tax cuts in U.S. history. As promised, President Trump wants to sign the bill into law before Christmas.

· 12/01 – Former Trump national security advisor Michael Flynn pleaded guilty to lying to the FBI about contacts with Russia’s ambassador in 12/2016. This places a senior Trump insider in a cooperative position for the investigators. Then again, how much credibility does a liar have?

· U.S. trade protectionism contrarian to the world coming together on trade. Long term impact.

CAUTION
“Russia, Europe,
Uranium 1 & Terror”

· 12/06 – Enjoying an 82%+ Russian approval rating, Vladimir Putin announced he will seek a 4th term as President. Serving out a 4th 6-year term would mean 24 years at the top including P.M. posts. Only Stalin ruled longer at 29 years. Putin moves 2018 election date to 3/18 – the 4th anniversary of annexation of Crimea….in response to Olympic Committee ruling?

· 12/05 – Russian team barred from 2018 Seoul Winter Olympics. Olympic Committee will allow Russian athletes to compete who meet stringent drug testing but they will be referred to as “athletes from Russia” in which no Russian flag can fly, no Russian anthem played and no Russian gov’t. officials can attend.

· 12/03 – Germany’s Social Democrats (Socialist Party) urged by French President Macron to from ruling coalition with Merkel’s conservative bloc. Following the 11/20 collapse of the “Jamaica coalition” negotiations in the worst crisis of Merkel’s 12yr chancellorship. New elections as early as next spring may still be the only solution. Sources of tension are immigration, taxation & the environment. Right wing has seat in German decision-making and wants new elections.

· 12/08 – Britain and Ireland agree on Irish border regulations mainly acknowledging there will be no border controls on the Irish Sea. It clears the way for a second a phase of talks with the EU. Negotiators reached agreement in principle on the BREXIT “divorce bill” earlier in the week in the €45b to €55b range down from €60bn that the EU initially demanded. Agreement promotes further December & January negotiations. U.K. withdrawal from EU takes place in 3/2019.

· Atty. Gen. Sessions raised the possibility of a special counsel appointment to investigate the Uranium One Deal involving the Clinton Foundation in which a Russian company took control of 20% of entire supply of U.S. uranium supply used to make nuclear weapons in exchange for Clinton Foundation donations. In a decree on March 20, 2008 Russia’s Vladimir Putin, abolished the Federal Agency for Nuclear Power. The public corporation Rosatom (he owns) was vested with the authority to implement on behalf of the Russian Federation the rights of shareholders in the joint-stock companies in the nuclear energy industry. In 2013 Rosatom retained full ownership. Matter of U.S. national security.

· China hard landing: rising corporate debt & slower GDP growth are OECD and IMF concerns. Debt is 250% of GDP. National Congress of the Chinese Communists Party confirms Xi Jinping as its most powerful leader since Mao. Xi loyalists make up inner sanctum of Chinese politics into the next decade. 6% GDP in 2018 will be difficult.

· Spain’s Rajoy announces snap elections on Dec. 21st to help defray the Catalonian independence crisis. Could result in breakaway = could spread thru EU. Former Catalan Pres. Puigdemont to appear in court 11/17. On 11/02: 8 Catalan gov’t. members jailed in Spain for role in independence rebellion & sedition.

The Best and the Brightest” Syndicate Forecasts and Sound Bites for Next Week & November

I am happy to announce that the “QC” once again received 100% unanimous participation from all 25 syndicate desks surveyed for today’s “Best & Brightest” edition! Thank you to all of them. 20 of today’s respondents are in the top 21 while 23 are among 2017’s YTD top 27 ranked syndicate desks according to today’s Bloomberg’s U.S. IG U.S. Investment Grade Corporate Bond underwriting league table. The 2017 League table can be found on your terminals at “LEAG” + [GO] after which you select (US Investment Grade Corporates). The participating desks represent 81.38% of all IG dollar-denominated new issue underwriting as of today’s table share percentage which simply means they’re the ones with visibility. But it’s not only about their volume forecasts, it’s also about their comments! This core syndicate group does it best; they know best; so they’re the ones you WANT and NEED to hear from. It’s a great look at the week ahead.

*Please note that these are Investment Grade Corporates only. They do not include SSA issuance unless otherwise noted.

As always “thank you” to all the syndicate desks that participated in today’s survey. Below is opening to this week’s survey.

“Welcome to Friday. In preparation for takeoff, please ensure all negative attitudes are properly stowed. On behalf of QC Air welcome aboard. I expect sunshine and good intel today for our trip. Enjoy the ride and thanks for flying QC Air.

This week’s geopolitical recap:

The FOMC meets next Tuesday and Wednesday the 13th and 14th. Over 94% believe the Fed will hike rates which is already baked in. The nation’s largest Tax Reform bill in over 30 years may in fact get signed by President Trump by Christmas. The situation in North Korea remains the lone high risk event on the global risk monitor despite the U.S. claim to possess powerful CHAMPS microwave pulse technology that can disable NOKO’s missile launch systems. The situation in MENA has been upgraded to elevated with Trump’s announcement that the U.S. formally recognizes Jerusalem as Israel’s capital following warnings from Jordanian, Palestinian and Turkish leadership among others that it will destabilize the region. Yemeni President Ali Saleh was assassinated and Prince Mohammed bin Salman’s “Vision 2030” resulted in multi-billion dollar anti-corruption settlements with members of the house of Saud and major KAS players. MBS, as the Saudi Prince is commonly known, also purged rivals in order to anchor his leadership and future plans. Germany’s Social Democrats agreed to pursue preliminary talks to form a coalition government with Merkel’s conservative CDU party and will include a third CSU party. German political stability is needed to cement the EU’s keystone economy. Ireland and Britain are near an accord on future Irish border regulations that would help promote an agreement in principle on the BREXIT “divorce bill.” Leveraging his 85% approval rating at home, Vlad Putin announced he will seek a 4th 6-year term as President of Russia that would make it the second longest tenure to Stalin’s 29 year reign. Putin also moved the Russian election to coincide with the 4th year anniversary of its annexation of Crimea, possibly in reaction to the prior day’s Olympic Committee ruling that bars Russian officials, flags and anthem at the 2018 Seoul Olympics in which Russian athletes must also agree to stringent drug testing.

Entering this morning’s Friday session –

The IG Corporate WTD total stands at $18.434b. We priced $316mm less than this week’s average midpoint estimate of $18.75b or 98.31%.

MTD we priced 55.86% of the syndicate projection for November IG Corporates or $18.434b vs. $33b.

Entering today’s session, the YTD IG Corporate-only volume is $1,325.402b vs. $1,281.017b on December 8th, 2016 or $44.385b (3.46%) more than a year ago.

The all-in or IG Corporate plus SSA YTD volume is $1,640.543bvs. $1,620.951b on December 8th, 2016 or $19.592b (1.21%) more than the year ago total.

Entering this morning’s session, here are the five key primary market driver averages for the 33 IG Corporate-only deals that priced this week.

Spreads across the four IG asset classes tightened 0.25 bps to 3.00 bps vs. 3.25 bps as measured against their post-Crisis lows.

The 19 major industry sectors tightened 0.68 bps to 6.32 bps from 7.00 bps as measured against their post-Crisis lows.

For the week ended December 6th, Lipper U.S. Fund Flows reported an inflow of $622.386b into Corporate Investment Grade Funds (2017 YTD net inflow of $116.331b) and a net inflow of $217.412m into High Yield Funds (2017 YTD net outflow of $12.633b).

Taking a look at the secondary trading performance of this week’s 33 IG Corporate and 6 SSA new issues, of the 39 deals that printed, 23 tightened versus NIP for a 59.00% improvement rate, 11 widened (28.25%) and 5 were flat 12.75%).

Entering today’s Friday session here’s how much we issued this week:

IG Corps: $18.434b

All-in IG (Corps + SSA): $24.684b

And now it’s time for today’s question “what are your thoughts and numbers for next week’s IG Corporate new issue volume?” Thank you in advance for your time and contribution!

I have a special edition for you tonight, it is chock full of all the usual talking points of our dollar IG primary markets as well as a feature for you that I recommend you all read about Prudential Financial’s long and wonderful history giving back to our nation’s veteran community. Mischler was selected as an active Co-Manager today’s Prudential Financial 30nc10 f-t-f new issue. Then, it’s on to a permission-ed piece by the Edison Electric Institute re: what they and our utility sector are doing to remedy and resolve the damage done by the recent hurricanes Irma and Harvey. Edison is quite the authority for all things power-related in the United States.

So, sit back relax, the day is done and this is all you really need to know. Thank you as always for stopping in.

What’s more is the S&P, the Dow and Nasdaq all closed today’s session at new all-time highs. CDXIG and HV also both reached new tights!

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

The IG Corporate WTD total is 58.55% of this week’s syndicate midpoint average forecast or $19.175b vs. $32.75b.

MTD we’ve priced 59.95% of the syndicate forecast for July or $67.415b vs. $112.45b.

There are now 12 issuers in the IG credit pipeline

Today’s IG Primary & Secondary Market Talking Points

Mischler Financial was named a “passive” Co-Manager on today’s Metropolitan Life Global Funding 10-year Secured FA-backed Notes tranche. We thank Team MetLife for selecting Mischler, the nation’s oldest Service Disabled Veteran broker dealer, from among your many diversity partners.

PS Business Parks Inc. upped its $25 par PerpNC5 cumulative preferred Series “X” new issue to $200mm (8mm shs) from an initially announced $100mm (4mm) size at the launch and at the tightest side of guidance.

Penske Truck leasing Co. increased its long 5-year 144a/REGS Senior Notes new issue to $600mm from $500mm today at the launch and at the tightest side of guidance.

Banistmo S.A. upsized today’s 5-year 144a/REGS Senior Notes new issue to $500mm from $400mm at the launch and at the tightest side of guidance.

The average spread compression from IPTs and/or guidance thru the launch/final pricing of today’s 13 IG Corporate-only new issue, was <26.56> bps. Including today’s PS Business Parks IG-rated Preferred, the spread compression across 14 tranches was <25.11> bps.

BAML’s IG Master Index was unchanged at +117. +106 represents the post-Crisis low dating back to July 2007.

· On Sunday, 9/03 NOKO detonated a 100 kiloton hydrogen bomb 5-times more powerful than that dropped on Nagasaki causing a 6.3 magnitude earthquake according to the U.S. Geological Survey. Head of IAEA (Int’l. Atomic Energy Authority) said the hydrogen bomb test a “new dimension of global threat” to the world. On Tuesday, 8/29 NOKO ICBM launched an ICBM over Japan that landed in the Pacific Ocean. On Monday, 9/04 U.S. Ambassador to the UN, Nikki Haley said “the time has come to exhaust all diplomatic means to end this crisis. Only the strongest sanctions will enable us to solve this problem through diplomacy.” Monday 8/31 began joint U.S. & S. Korean military exercise the world’s largest computerized command control implementation that involved over 80,000 U.S. and South Korean troops. CIA Director Mike Pompeo cites U.S./NOKO tensions have subsided saying “We’re not closer to war than a week ago, but we are closer than we were a decade ago.” Rhetoric reached height on Friday 8/11 w/ Trump saying “U.S. military solutions are in place, locked and loaded” matching his earlier statement that “North Korea best not make any more threats to the United States or they will be met with fire and fury like the world has never seen.” On Th. 8/10 NOKO announced its plan to “pre-emptively strike on Guam in mid-August.” Trump’s reaction, “Maybe my ‘fire and fury threats weren’t strong enough!” N. Korea launched an ICBM on 7/28. NOKO’s Hwasong-14 missile can reach any location on the U.S. continent. NOKO may use nuclear technology as barter for food with ”suspect” nations. U.S. sanctions of select Chinese banks to pressure PRC to influence NOKO has failed. China insiders say PRC does not have influence with NOKO that the U.S. thinks it does. China in precarious position given South China Sea Islands. Asian allies justified to build out their respective militaries.

ELEVATEDBREXIT Fallout

· Pakistani Prime Minister Nawaz Sharif was ousted for his role in a corruption scandal. He selected his brother Shahbaz to take over. Many geopolitical strategists point to the India/Pakistani

border conflict as one of if not the most volatile. Both are nuclear capable. The 100-year old non-partisan Brookings Institute calls Pakistan “the world’s most dangerous country.”

· EU and Macron-Merkel coalition to squeeze U.K. for all it can re: BREXIT “divorce” bill. Companies prepping for hard BREXIT & 2 years of weak growth. PM May wants rolling series of meetings with EU. UK withdrawal from EU takes place in March, 2019.

CAUTION“U.S. political gridlock”

· Trump tax reform targeted for this year. Infrastructure reform challenges & consensus GOP support to pass legislation still in doubt after repeal and replace defeat in late July. Trump’s Strategic and Policy Forum disbanded as did his Manufacturing Council. Tense U.S. political environment.

· Increased chance of 2018 U.S. recession; “maybe” one more rate hike in 2017; recent absence of inflation and $4.5 trillion balance sheet unwind are concerns.

Syndicate IG Corporate-only Volume Estimates For This Week and September

IG Corporate New Issuance

This Week
9/11-9/15

vs. Current
WTD – $19.175b

September 2017

vs. Current
WTD – $67.415b

Low-End Avg.

$31.71b

60.47%

N/A

N/A

Midpoint Avg.

$32.75b

58.55%

$112.45b

59.95%

High-End Avg.

$33.79b

56.75%

N/A

N/A

The Low

$25b

76.70%

$100b

67.415%

The High

$40b

47.94%

$125b

53.93%

A Special Message from the EEI about Hurricane Irma

In light of the recent catastrophic hurricanes Harvey and Irma that slammed Texas and Florida among other states and with damage costs estimated as high as between $150b-$200b I wanted to share an article with you all that came to me from the Edison Electric Institute (EEI). It’s informative and in many ways perhaps the best source from which to receive a power/electric damage assessment from and certainly to comprehend the immensity of what EEI and the power companies are facing. It should also serve as reassurance that they are in fact truly doing everything they can to power you all back up. We here at Mischler are acutely aware of what our friends (issuers, accounts, family and friends) have gone through and will be facing in the coming weeks and in some cases months. We appreciate what you’re experiencing and would like to thank the EEI and particularly Brian Reil at EEI Media Relations for the quick permission approval process to re-print the below article for all of you. There are some embedded links in the piece that may also be very helpful and informative to you.

The Edison Electric Institute is the association that represents every U.S. investor-owned electric company. EEI’s members provide electricity for about 220 million Americans, and operate in all 50 states and the District of Columbia. As a whole, the electric power industry supports more than 7 million jobs in communities across the United States. In addition to its U.S. members, EEI has more than 60 international electric companies with operations in more than 90 countries, as International Members, and hundreds of industry suppliers and related organizations as Associate Members.

Organized in 1933, EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums.

Hurricane Irma: More Than 50,000 Workers From Across the U.S. and Canada Dedicated to Power Restoration Efforts

WASHINGTON (September 11, 2017) – As of 7 p.m. EDT, more than 7.1 million customers are without power across Florida and in parts of Alabama, Georgia, and South Carolina as a result of Hurricane Irma. As the storm moved through the region, companies were able to address more than 1.25 million outages, thanks largely to recent investments in energy grid technology and automation. Irma was downgraded to a tropical storm earlier today.

“This is likely to be one of the largest and most complex power restoration efforts in U.S. history,” said EEI President Tom Kuhn. “An army of more than 50,000 workers from across the United States and Canada is now dedicated to supporting the industry’s Irma restoration efforts. This includes workers from affected companies, as well as mutual assistance crews, contractors, and other support personnel. Mutual assistance is a hallmark of our industry and serves as an effective—and critical—restoration resource for electric companies.”

Given the size and strength of Irma, infrastructure systems will need to be rebuilt completely in some places of Florida before power can be restored. This will delay restoration times, and customers should be prepared for the possibility of extended power outages.

“We know that being without electricity creates hardships, and we greatly appreciate customers’ patience as electric companies work day and night to assess damage and to restore power where and when conditions are safe to do so,” said Kuhn. “Companies will continue their storm restoration efforts around the clock until the last customer who can receive power is restored.”

Responding to major events like Irma requires significant coordination among the public and private sectors, and strong industry-government coordination is critical. As we did throughout Hurricane Harvey, EEI and the electric power industry are working through the Electricity Subsector Coordinating Council (ESCC) to coordinate with the federal government, other segments of the industry, and critical infrastructure operators.

For the fourth consecutive day, Energy Secretary Rick Perry joined an ESCC call with the CEOs of companies impacted by Irma to identify issues that will expedite power restoration. “We commend Secretary Perry’s ongoing leadership and the commitment of the entire Administration to ensure unity of effort in the Irma response,” said Kuhn.

Ensuring the safety of customers, communities, and workers is the electric power industry’s highest priority. As always, customers should stay away from downed power lines and always treat fallen wires and anything touching them as though they are energized. Customers using generators should plug appliances directly into the generator and follow all safety warnings.

Cited by Wall Street Letter in each of 2014, 2015 and 2016 for “Best Research / Broker-Dealer”, the QC is one of three distinctive market comment pieces produced by Mischler Financial Group.The QC is a daily synopsis of everything Syndicate and Secondary as seen from the perch of our fixed income trading and debt capital markets desk and includes a comprehensive “deep dive” with optics on the day’s investment grade corporate debt new issuance and secondary market data encompassing among other items, comparables, investment grade credit spreads, new issue activity, secondary market most active issues, and upcoming pipeline. To receive Quigley’s Corner, please email: rkarr@mischlerfinancial.com or via phone 203.276.6646

Bank of America posted Q2 earnings early this morning beating on EPS ($0.46 vs. $0.43) and revenues ($22.829b vs. $21.781b) and fixed income trading ($2.254b vs. $2.22b) although net interest income was off ($11b vs. $11.34b). Our nation’s second largest bank as measured by AUM, wasted no time in capitalizing on the overall positive earnings by announcing a mega $7.00b 4-part. As I wrote here in last Thursday’s “QC” in reviewing Bank of America’s Q3 Outlook call as told by Kevin Barthelmes of BAC Syndicate, “2-, 3- and 5-year FRN issuance is up 40% to 45% YTD with lots of that volume originating from Asia. Notably, we are also expecting more callable structures, for example, 2NC1 and 3NC2 issuance.” Lo and behold mid-morning today BAC announced a 4nc3 FRN, a 4nc3 fixed-to-FRN, a 6nc5 and 11nc10. So, there really is good stuff here in the “QC” folks.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

The IG Corporate WTD total is 105.68% of this week’s syndicate midpoint average forecast or $30.35b vs. $28.72b.

MTD we’ve priced 74.51% of the syndicate forecast for July or $62.89b vs. $84.40b.

There are now 8 IG Corporate, Yankee and/or SSA new issues in the IG credit pipeline.

Today’s IG Corporate dollar primary market featured only one domestic issuer – Marathon Oil – among two other Yankee issuers. 3 issuers priced 4 tranches between them totaling $2.30b. The SSA space contributed 1 deal, the well-telegraphed $5.00b 4-part for JBIC that boosted the session’s all-in IG Corporate and SSA day total to 4 issuers, 8 tranches and $7.30b.

Here’s how this week’s IG Corporate volume numbers measure up against the WTD and MTD syndicate estimates:

The IG Corporate WTD total is 146.79% of this week’s syndicate midpoint average forecast or $26.79b vs. $18.25b.

MTD we’ve priced 38.55% of the syndicate forecast for June or $32.54b vs. $84.40b.

There are now 5 IG Corporate, Yankee and/or SSA new issues in the IG credit pipeline.

So, tomorrow we finally kick off six-pack U.S. bank earnings with Citigroup, J.P. Morgan and Wells Fargo reporting. Next Tuesday is BAML and Goldman Sachs followed by Morgan Stanley on Wednesday. Hopefully these market leaders break open the issuance drought in short order and subsequently lead the way for all the issuance universe who they bank up to the traditional mid-August thru Labor Day slow-down.

The BAML Q3 Outlook Call*Please note that this sub section is discerned from my own note taking. I own any/all discrepancies or inaccuracies vs. the call although I represent there should be none. Thanks! -RQ

High Yield issuance is up 20% YoY but all related to Q1 volume. Looking at Q2 business, issuance is down $10b YoY. From a sector perspective HY saw big pick-ups in the Industrial, Healthcare and Energy sectors. There was a notable fall-off in the TMT sector. The remaining sectors have been fairly consistent YTD. Two-thirds of high yield issuance has been motivated by re-financings. M&A volumes continue to represent about 20% of HY issuance volume. Pick-ups were seen in triple-“CCC” rated issuance to $17b from $4b. Euro issuance represented about €32b and a hefty £10b. Euro and Sterling issuance continues to illustrate overall growth for HY issuance.

BAML holds strong convictions for re-financing trades as issuers can lock in highly favorable long-term rates in here and looking forward. $50b is committed to M&A financings for the remainder of the year predominantly focused on longer tenors with $10b of that in new HY issuance.

……and now for the High Grade Issuance Outlook

BAML Syndicate’s Kevin Barthelmes did a great job pinch hitting for Dan Mead today in reviewing YTD new issuance as well as the 2H 2017 Outlook.

Here is all the stuff you WANT and NEED to know:

YTD IG ex-SSA supply volume for the first half of 2017 is up 1.8% YoY. (The “QC” IG Corporate-only count is $754b YTD). BAML had called for a 5-7% decline in IG issuance for 2017 at the end of last year. The YTD split is as follows: $430b (Corporates) down <3.5%> YoY and $300b (Financials) up 10% versus 2016. Issuance pressure was seen mostly from the M&A space that was markedly down year-over-year. YTD M&A driven issuance is expected to be $140b-145b or 10% of IG overall supply. In 2016 we saw $290b which represented 20% of issuance in 2016.

In terms of the back half of 2017, the themes are similar to Q2 2017. Expectations are for corporate supply to be down on the year given the decline in M&A. This July, we expect issuance to be down about 12% versus last year. We also experienced a robust August and September in 2016 which is not expected this year. Keep in mind that Q1 2017 was a record breaking quarter in terms of new issuance. Additionally, Q4 2016 saw companies motivated to price deals ahead of last November’s Presidential election that boosted volumes. BAML does not expect a repeat of July through September again this year.

FRNS and Callable Structures En Vogue

2-, 3- and 5-year FRN issuance is up 40% to 45% YTD with lots of that volume originating from Asia. Notably, we are also expecting more callable structures, for example, 2NC1 and 3NC2 issuance. Expect to see a continuance of that in the second half of the year. It does not feel as though issuers are getting worried about rates at all. Dialogue outside of M&A has been primarily on liability management issuance of which we’ve had roughly $40b YTD. Expect another $40b in LM issuance in the second half as well which would represent a 10-15% increase versus 2016.

So, to recap, here are the issuance outlook themes for the second half of 2017:

Lack of supply

Continued FRN demand and callable structures

Liability Management issuance

Strong Capital/Low Growth

Thank you to all those a who contributed on today’s BAML Outlook Call and in particular I’d like to send shout-outs to the always differentiating intel and commentaries from those who spoke from the sectors I cover here at Mischler – namely Hima Inguva (Banks) and Peter Quinn (Electric Utilities & Power). Listening is always the most informative form of communication.

Today’s IG Primary & Secondary Market Talking Points

For the week ended July 5th, Lipper U.S. Fund Flows reported an inflow of $2.299b into Corporate Investment Grade Funds (2017 YTD net inflow of $71.493b) and a net outflow of $1.144b from High Yield Funds (2017 YTD net outflow of $8.865b).

Durable Goods, Cap Goods and Manufacturing economic data all missed estimates this morning and the Supreme Court reinstated a large part of President Trump’s travel bans from six Muslim countries for a period of 90 days and 120 days for all refugees. The six countries in question are: Iran, Libya, Somalia, Sudan, Syria and Yemen. In international news, Italy bailed out two failed banks to the tune of €17b. In light of Macron’s victory in France and subsequent Parliamentary majority, it has been thought that a German-French alliance to motivate deeper EU integration would anchor the continental experiment. Instead, Italy’s state bail out opened it to EU criticism. In the end, each nation will watch over its own despite EU rules and regulations highlighting each member’s disparate individual histories, languages, borders and cultures. Germans are working to help support the quality of life in France. Such exceptions to EU laws as Italy applied today, call into question just how integrated the EU can ever be.